Key Takeaways
- Galaxy Digital is in talks to act as a market maker for Polymarket and Kalshi.
- The booming prediction market sector presents a significant arbitrage opportunity.
- Regulatory approvals have eased the path for institutional trading desks to provide liquidity.
Galaxy Digital is reportedly in discussions with Polymarket and Kalshi about becoming a liquidity provider on their platforms.
The move comes as a growing number of trading firms dip their toes into prediction markets amid rising adoption and declining compliance risk.
Galaxy Experiments With Prediction Market-Making
In comments reported by Bloomberg, Galaxy Digital CEO Mike Novogratz said the firm is in talks to act as a market maker for Polymarket and Kalshi.
“We’re doing some small-scale experimenting with market-making on prediction markets, but I think you’ll eventually see us providing broader liquidity,” he said.
As it does for global crypto exchanges, Galaxy would introduce market depth by stepping up to buy and sell prediction contracts.
In a sector characterized by tight liquidity and thin spreads, the presence of large, institutional market makers could lower costs for users.
Moreover, if companies like Galaxy plug into both Polymarket and Kalshi—the two most popular platforms in the space—they could provide much-needed arbitrage.
An Opportunity for Institutional Traders
Currently, a lack of arbitrageurs in the prediction market space contributes to significant price divergence.
For instance, at the time of writing, contracts for Kevin Hasset to become Chair of the Federal Reserve were trading at $0.35 on Kalshi and $0.14 on Polymarket.
The situation recalls the cryptocurrency market prior to 2016, before professional trading firms established the infrastructure that drives modern liquidity provisioning.
Back then, Jump Trading, Alameda Research, and Susquehanna International were among the first specialized crypto market makers. Today, some of those same firms are eying similar opportunities in prediction markets.
In 2024, Kalshi onboarded Susquehana as its “first major institutional market maker.” And earlier this month, Bloomberg reported that Jump Trading had started providing liquidity for the platform.
Lowering Regulatory Barriers
Announcing the firm’s partnership with Susquehana, Kalshi founder Tarek Mansour argued that institutional market making was only possible thanks to the platform’s regulatory approval from the Commodity Futures Trading Commission (CFTC).
The situation today marks a dramatic turnaround since 2022, when the CFTC ordered Polymarket to withdraw from the U.S.
After more than three years in exile, the firm’s acquisition of QCEX earlier this year paved the way for its recent comeback.
As the decentralized event contracts platform prepares for a broader U.S. push in 2026, QCEX’s authorizations from the CFTC, which cover exchange activity and clearing, provide Polymarket with crucial regulatory cover.
The Casino Question
With the CFTC giving prediction markets the all-clear, the threat of legal challenges based on gambling laws continues to weigh on platforms and would-be market makers like Galaxy. But the gambling issue may also be resolved soon.
Lawsuits filed by the New Jersey Division of Gaming Enforcement (NJDGE) and Blue Lake Rancheria, a native American tribe, had threatened to derail Kalshi’s winning streak.
In both cases, plaintiffs argue that prediction markets should be treated as a form of gambling. However, it looks increasingly likely that courts will side with the defendant.
Kalshi’s ongoing legal battles represent the final compliance challenge prediction market platforms face in the U.S.
A favorable verdict in either case could set an important precedent that curbs the scope of any further litigation based on gambling law, laying the foundations for further institutional participation.
James Morales is CCN’s blockchain and crypto policy reporter. He has been working in the news media since 2020, writing about topics such as payments, banking and financial technology. These days, he likes to explore the latest blockchain innovations and the evolving landscape of global crypto regulation.
With an educational background in social anthropology and media studies, James uses his platform as a journalist to explore how new technologies work, why they matter and how they might shape our future.
